We hosted a community forum last week on the impact of the recession and budget cuts on women in Washington state.  Over 100 people attended for an evening of great conversation on what’s happening to women in our state and what we can do about it.

While few of us have escaped the impact of the Great Recession and slashing of state budgets, women have been disproportionally hurt by cuts to our public services.  Over 90 percent of budget cuts have been made to education, health care, and social services – areas that disproportionally employ and serve women.  The cuts have had a profound impact on women’s employment recovery, as well as on the investments we make to keep women and children economically secure, healthy, and safe. 

The bottom line: investing in the well-being of women brings returns in the form of a strengthened economy, more economically secure families, healthy and happy children, and stronger communities. 

To learn more about how women are faring in our state, read our brief: Women, Work, & Washington’s Economy: How State Budget Cuts are Hurting All Three.  Check out our event page for more details on the forum.

Due to a new law that changes the state retirement systems, nest eggs will shrink for many teachers, child protection caseworkers, parole counselors and others who deliver vital services for modest pay. This is despite the fact that their pensions are adequately funded and sustainable. The changes will also require all public-service workers and the state to shoulder higher costs unnecessarily.

In what is clearly a solution in search of a problem, the new law makes two significant changes for public employees hired during or after May 2013:

• Stiffer early retirement penalties –   Those who retire before age 65 will see their benefits reduced by 5 percent for each year they are short of the official retirement age. So a teacher with 30 years of service who retires at age 60 will have his or her monthly retirement allowance permanently reduced by 25 percent. The penalty was previously 3 percent.

• Higher contribution rates – When estimating future pension liabilities and contributions, the state will start assuming  its pension fund investments will earn less money than they have in the past. This will mean that both the state and public employees will have to contribute more money to retirement in a given year  to ensure that  pension funding targets  are met.  

Over the last 20 years the state pension trust fund has averaged annual returns of approximately 8.7 percent and has used a more modest  8 percent rate to estimate future liabilities and contribution needs. The new law  gradually reduces  the investment return assumption  to 7.7 percent  by 2017.  That may not sound like a big change, but it will mean that currently employees will pay more today in higher contributions, yet receive a smaller future pension. 

While touted as necessary  to ensure the long-term health  of our public retirement system, these changes ignore the fact that Washington has  some of the most well-funded and well-run pension plans in the country.

By the state actuary’s estimates, Washington’s retirement system is already securely funded,  with $1.02 in assets  on hand to pay for every dollar of pension benefits employees have currently earned. According to the Pew Center on the States, only two states, New York and Wisconsin, boast higher funding ratios.

These pension changes will have real impacts for Washington families, asking long-time dedicated public employees to pay more into an already well-funded pension system while at the same time reducing the value of future retirement.

Investments that help Washingtonians find work and weather difficult financial times were cut far more deeply than any other public priority during the 2012 Legislative Session. Although these economic security investments represent the smallest share of the entire state budget (3.3 percent), they account for nearly half of all reductions to public services.   

 
The largest single cut was $127 million from Temporary Assistance to Needy Families (TANF), which provides struggling families with child care support, job training, and help finding a job. 

Some said that this cut was justified because the number of people accessing the program has declined, leaving unspent funds carried over from the previous year. But don’t be fooled— the needs of families have not decreased.  In fact, the reason fewer families are receiving assistance is because restrictions to eligibility have been made over the past few years, forcing struggling families out of the program. For example:

• Over 25,000 parents and children have lost services due to implementation of a 60-month time limit;
• Over 8,000 fewer families received child care assistance at the close of 2011, compared to 2009, due to reduced eligibility;
• Over 2,000 parents and children have lost assistance due to a reduction in the maximum amount of income a family can earn and still be eligible for the program;
• Approximately 1,700 children who are cared for by relatives, live in immigrant families, have a disability or are being cared for by a legal guardian have been terminated from services due to new income restrictions. (1)
  

The Legislature could have chosen to reinvest the unspent funding to help families hardest hit by the recession, and improve the overall economy by getting people back to work. Instead, the bulk of the funds were used to balance the budget. 

Some good news: a small portion of funding was used to readjust eligibility for child care.  Eligibility was increased from 175 percent of the Federal Poverty Level (FPL) ($3,361/month for a family of four) to 200 percent FPL ($3,842/month); the state restored the maximum income assistance amount for larger families, and enacted other administrative changes that lessen barriers for families.  However, this is just a tiny drop in the bucket of what’s needed to turn the economy around, get families back on their feet, and secure our future prosperity.

1. Caseload data from DSHS: http://www.leg.wa.gov/JointCommittees/LEWOTF/Documents/Apr232012/LegPictures.pdf and OFM forecasting division: http://www.workfirst.wa.gov/performance/measures/WorkFirstChartsJan2012.pdf

The budget that the Governor signed into law today misses the mark on strengthening the economy and meeting the public’s needs. Rather, it relies on accounting maneuvers and further cuts to investments that keep families economically secure.

Increasing our state’s resources, which would stimulate economic growth and promote jobs by strengthening our schools, transportation system and other assets that employers need, accounts for less than 1 percent of the solution to the $1 billion shortfall.

All told, only $6.7 million in new revenue was enacted this year. Policymakers curtailed an unproductive tax break claimed by large out-of-state banks and closed a loophole that allowed businesses selling roll-your-own cigarettes to avoid charging cigarette taxes.  However, lawmakers also shortchanged future revenues by doling out or renewing a number of tax breaks for food processors, newspapers, movie companies and others, costing the state $19.8 million.

One-time transfers of funds and other accounting changes make up the biggest share of the budget solution (65 percent), with the largest portion coming from a change in the way tax collections are distributed to local governments. By distributing payments on a monthly basis, rather than daily, the state will get a one-time boost of $238 million.

Spending cuts make up about one-third of the budget solution. The Legislature avoided additional cuts to colleges and K-12 education, but approved cuts to health care, environmental protections, and services that sustain families during difficult financial times.

This continues policymakers’ misguided three-year trend of responding to the economic crisis primarily by cutting  services that grow a strong economy rather than building a revenue system that supports a healthy workforce, sound roads and bridges, and other public priorities. As the graph below demonstrates, cuts have been 17 times greater than the amount of revenue generated through tax measures since 2009.

Such a strategy is as unwise as it is unsustainable.

 Stay tuned to schmudget for more analysis on the final budget.

Join us for a community forum on the impact of the recession on women and the economy.

Tuesday, May 8, 2012 from 6 to 8 p.m.

Wing Luke Asian Museum, Community Hall

719 South King Street, Seattle

 Panelists:

•    Lori Pfingst, Senior Policy Analyst, Washington State Budget & Policy Center

•    Marilyn Watkins, Policy Director, Economic Opportunity Institute

•    Dana Laurent, Political Director of Planned Parenthood Votes Northwest

•    Diane Narasaki, Executive Director of Asian Counseling & Referral Service

•    David Ward, Legal and Legislative Counsel at Legal Voice

The discussion will be moderated by Erica Barnett from PubliCola.

Co-sponsors:

API Chaya (formerly API Safety Center and Chaya); Asian Counseling and Referral Service; Economic Opportunity Institute; League of Women Voters of Washington; Legal Voice; MomsRising; National Council for Jewish Women, Seattle Section; National Organization for Women, Washington Chapter; National Women's Political Caucus of Washington; Planned Parenthood Votes Northwest; Progress Alliance; Refugee Women's Alliance; Statewide Poverty Action Network; University of Washington Women's Center; Washington Community Action Network; Washington State Coalition Against Domestic Violence; Washington State Labor Council, AFL-CIO; Win/Win Network; and Women's Funding Alliance.

 Please join us for this free community event. Click here to R.S.V.P.

Interested in this topic? Check out our policy brief- Women, Work, and Washington's Economy: How State Budget Cuts are Hurting All Three.

Part four in a series on Washington’s long-term fiscal challenges.

Washington’s outdated tax system is starving our state of vital resources desperately needed to invest in what it takes to create jobs and build a strong economy.

The amount taken in from state taxes, measured as a share of our state economy, has been steadily falling for the past couple of decades.  In fact, since 1995 there has been a 30 percent drop. Without changes in the tax system, this downward trend won’t subside.

The major reason behind this decline is that Washington’s tax structure has not kept up with the changes in the state’s economy. It was built for a different time. For example, increasingly, the wealthiest Washingtonians make their money from capital gains, which the state doesn’t tax. In addition, the state sales tax – Washington’s largest revenue source – doesn’t reflect the massive shift in consumer spending patterns. When the sales tax took effect in 1935, people spent more on things than services. Today it’s the other way around, but the sales tax isn’t applied to most services – many of which didn’t exist when the sales tax began.

Elimination of the motor vehicle excise tax (MVET) through approval of Initiative 695 in 1999 made the decline even worse. Replacing the MVET with a flat, $30 vehicle licensing fee costs the state more than $800 million in annual resources.

In an era of so much social and economic upheaval maybe it’s natural to gravitate toward things that are traditional and familiar. But Washington’s 1930s-era tax system is making things worse. Difficult as it may be, we must acknowledge that Washington faces 21st century economic challenges that our quaint tax system simply can’t handle.

We can create a sustainable tax system that meets the demands of the 21st century global economy.  Key reforms that would put Washington on the right path include modernizing the sales tax to include more consumer services and adopting a tax on rapidly-growing capital gains. These two options would help reverse the downward spiral of economic resources.  In the coming year, adopting these changes would increase available state tax revenues by at least $800 million -- all of which could be invested health care, education, and other necessities proven to create jobs and promote prosperity.

Check out parts one, two, and three of this series for more information on Washington’s long-term fiscal challenges.

To continue to make the investments in public health, education, communities and public safety that all Washington residents care about, we need a revenue system that works. See the graphic below to learn more about our broken revenue system.